By Kelly Sloan
With the myriad of other acute issues cropping up – the Planned Parenthood videos, the EPA dumping millions of gallons of toxic waste into rivers, Hillary Clinton doing her level best to outdo Nixon with her own 21st century application of Watergate – a few of the more chronic issues tend to get forgotten at the sidelines.
Tax reform is unfortunately one of those issues, and yet it can be plausibly argued that its importance in terms of economic growth – or lack thereof – ought to place it near the top of the policy heap.
The United States has the highest corporate income tax in the industrialized western world, as defined as those nations that are part of the Organization for Economic Cooperation and Development (OECD). To wit, this means that America’s 35 percent corporate rate is higher than that imposed by, for instance, such paragons of laissez faire economics as France and Sweden.
The effects of this egregious tax rate being inflicted on American business are hardly conducive to the growth of prosperity. It is a widely understood maxim that when you tax something, you get less of it. That is the point behind cigarette taxes, or a gasoline tax – to reduce consumption of those items. What exactly are we seeking to have less of by imposing the industrialized world’s highest tax rate on corporate income? Corporate income? Economic growth? Jobs and paychecks? If so, it seems to be working, given the anemic rate of economic growth we have endured since being told we have recovered from the Great Recession.
The fact that America’s corporate income tax rate is highest among the OECD nations is not simply a matter of statistical curiosity. Being in possession of that ranking is nothing less than an anchor on America’s competitiveness. Even liberal New York realizes that high tax rates make a jurisdiction less attractive to investment than another with a lower rate, hence their embracement of tax-free zones.
A punitive corporate income tax rate is not the only problem written into the U.S. tax code. The code itself is a labyrinthine nightmare that will cost American businesses between $18-19 billion this year to navigate in hopes of complying with the gestating web of laws. The average small business owner in this country spends 120 hours each year on tax preparation. It doesn’t require a whole lot of imagination to come up with far more productive and beneficial uses of that time.
Surely this ought to be an issue that Presidential hopefuls would be eager to weigh in on. Governor Jeb Bush is reportedly in town this week, and it would be illuminating to hear his thoughts on the topic. Then again, it is also issue that needn’t wait until 2016 or 2017 – some $20-40 billion and a few dozen months of feeble growth later – for remedy.
Kelly Sloan is a Grand Junction based public affairs consultant, columnist for the Business Times, and Centennial Institute Fellow.